Ethan R. Okura
Hawai‘i Herald Columnist

Just about every family owns a car; many families own more than one. You may have wondered whether your car should be owned by your revocable living trust or whether it should stay in your name. Or, should it be in two names? In this month’s column, we’ll discuss what to do with your car in your estate plan.

If you have a revocable living trust, should you transfer ownership of the car to your trust? No, it isn’t necessary to do that. Hawai‘i probate laws have a special rule concerning motor vehicles. A motor vehicle (car, truck, motorcycle, etc.) does not have to go through probate, no matter how much it is worth.

Probate is a court proceeding that takes six months to a year or longer. If you own any real estate in your name only or as a “tenant-in-common” at the time of your death, and you don’t have a “transfer on death deed,” it has to go through probate. If you own assets other than real estate worth $100,000 or more at death (without a beneficiary or joint owner and not in a trust), the assets must go through probate. Motor vehicles are an exception. Since a car does not have to go through probate, you do not have to put it into your trust. If you have already put it into your trust, that’s fine: It doesn’t do any harm.

When someone dies owning a car, the person who is to inherit the car can easily have the ownership changed. Just go down to the Department of Motor Vehicle office in the county where you live. Take with you the following papers: the title (certificate of ownership), a certified copy of the death certificate, the odometer reading, a current safety check and the current registration. They will have you sign a paper called Affidavit For Collection of Personal Property. You’ll also need to pay a transfer fee, which is currently $10 on O‘ahu, $20 in Maui County, $10 on Kaua‘i, and $5 on the Big Island. It’s that simple.

What should you do with the car if the owner has to go into a nursing home? Motor vehicles are exempt for Medicaid qualification purposes. That means that an unmarried person with $2,000 or less in other assets can get Medicaid to pay the nursing home expenses, even if the person owns a car. A married couple with $150,620 or less in other assets can get Medicaid to pay the nursing home expenses even if the person in the nursing home owns a car. In theory, a person in a nursing home who has too much in assets to qualify for Medicaid could buy several expensive cars to get cash assets low enough to qualify for Medicaid. However, you should not do that. After the person dies, the government could possibly go after the cars and sell them to repay the amount Medicaid paid for the nursing home patient. Until recently, the state of Hawai‘i government had not pursued this form of Medicaid cost recovery often, but legally they can do so, and I have heard that at least in one recent case, the state did recover some of the nursing home expenses out of the value of an expensive car owned by a former Medicaid recipient who passed away.

If the person in the nursing home has some cash but no car, can you safely buy a car to reduce the cash even though the nursing home patient will never be able to drive the car? Our law office had a case like this in the past. The Medicaid eligibility worker claimed that the purchase of the car was a transfer of assets, resulting in a penalty (a waiting period before Medicaid will help). We convinced the Medicaid worker that there should be no waiting period at all for purchasing a car, as long as fair market value was paid for the car. If a relative of yours is in a nursing home with too much in assets to qualify for Medicaid, consult with an estate-planning attorney experienced in Medicaid planning. There are many cases where we have been able to get Medicaid to pay for nursing home costs when the family — and even other lawyers — thought it was impossible.

Honolulu Office (808) 593-8885
Hilo Office (808) 935-3344
Kauai Office (808) 241-7500

Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate-planning to protect assets from nursing home costs, probate, estate taxes, and creditors.

This column is for general information only and is not tax, financial, or legal advice. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate-planning specialist.


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